E-Delivery

(f ) Financial assets and liabilities: Financial assets include the Fund's cash, accrued interest receivable, subscription proceeds receivable, mortgage loan investments and other assets. Financial liabilities include amounts due to Fund Manager, accounts payable and accrued expenses and dividends payable. Recognition and measurement of financial instruments The Fund determines the classification of its financial assets and liabilities at initial recognition. Financial instruments are recognized initially at fair value and in the case of financial assets and liabilities carried at amortized costs, adjusted for directly attributable transaction cost. The Fund has designated its accrued interest receivable, subscription proceeds receivable, mortgage loan investments and other assets as loans and receivables, which are measured at amortized cost. Amounts due to Fund Manager, accounts payable and accrued expenses and dividends payable are classified as other financial liabilities, which are measured at amortized cost. The Fund had neither available-for-sale, nor held-to-maturity instruments as at or during the years ended February 28, 2015, February 28, 2014 and March 1, 2013. (g) Share capital: Common shares and Class A and B preferred shares are classified as equity. Incremental costs directly attributable to the issue of common shares and Class A and B preferred shares are recognized as a deduction from equity. (h) New standard and interpretation not yet adopted: (i) In July 2014, the International Accounting Standards Board ("IASB") issued IFRS 9 Financial Instruments to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on classification and measurement of financial instruments. In addition, IFRS 9 includes a single expected- loss impairment model and a reformed approach to hedge accounting. is standard is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. e Fund intends to adopt IFRS 9 in its financial statements for the annual period beginning March 1, 2018. e extent of the impact of adoption of the standard has not yet been determined. (ii) In December 2014 the IASB issued amendments to IAS 1 Presentation of Financial Statements as part of its major initiative to improve presentation and disclosure in financial reports. ese amendments will not require any significant change to current practice, but should facilitate improved financial statement disclosures. e amendments are effective for annual periods beginning on or after January 1, 2016. Early adoption is permitted. e Fund intends to adopt these amendments in its financial statements for the annual period beginning on March 1, 2016. e extent of the impact of adoption of the standard has not yet been determined. 4. Transition to IFRS: e Fund has adopted IFRS effective March 1, 2013 ("the transition date") and has prepared its opening IFRS statement of financial position as at that date. Prior to the adoption of IFRS, the Fund prepared its financial statements in accordance with Canadian GAAP. e significant accounting policies set out in note 3 have been applied in preparing the financial statements for the year ended February 28, 2015, the year ended February 28, 2014, and in the preparation of an opening IFRS statement of financial position as at March 1, 2013. 47

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